AG Wary of Insurance Plan ; But Hints Softer Competition Stance

Sep 20, 2007

By JAY FITZGERALD

Attorney General Martha Coakley yesterday signaled she could support changing the state's auto-insurance system to one in which insurers would set rates - if a current proposal is modified to protect consumers.

Coakley, who's expressed general reservations in the past about a proposal to overhaul the state's current system, said insurers should not be allowed to use credit scores to set rates if there is deregulation.

According to written testimony and a press release issued by her office after a hearing on the issue yesterday, Coakley also noted concerns about protecting good drivers in urban areas and the "risk of collusion by insurance companies" in setting rates under a new system.

She also questioned whether a plan by Insurance Commissioneer Nonnie Burnes, who recently proposed the revamp of the auto- insurance system, might "interfere" with laws designating the attorney general's office as the represenative of consumers' rights in auto-insurance case.

Significantly, though, Coakley never said Burnes's overall "managed competition" should be outright rejected.

"Managed competition regulations should implement competition in a manner that benefits consumers," she said in a statement.

In August, Burnes proposed a major overhaul in the way the state sets auto insurance rates.

Massachusetts is the only state in the country in which regulators set auto-insurace rates.

Alarmed that many insurers have pulled out of the state due to its heavy regulations, many have called for the introduction of more market-orientated policies.

Burnes's "managed competition" plan would give insurers more leeway to set their own rates.

But she's also called for a number of consumer protections, including banning the use of socioeconomic factors, such as the marriage status and education of motorists, in deciding whether to insure someone or in setting rates. She's delayed a final decision on banning use of credit scores when setting rates.

Burnes aims to implement a new "transitional" system at the end of next April.